Making money means managing measurements

Mike Owen

Just like John Genge, Mike Owen tackles your questions on running a garage and gets the ball rolling with sound business management advice.

Eleanor Roosevelt is quoted as saying: “The harder I work the luckier I become.”

It does not hold in the motor industry, where the harder you work the more profitable you should become. To ensure it, independent garages need to focus on business management.

You might say you already do – banking, wages, suppliers, VAT and so on – but business management is a whole lot more.

You can’t manage what you can’t measure, so it must be the intention of every business owner to understand the fundamental of the measurements you intend to manage and take the steps towards delivering that profit.

Our industry consumes money, almost creating a black-hole for profit (and more), but a fundamental of business management is to consider profit and return on that investment not to be a ‘nice to have’, but an imperative to the future of the business and a debt to be paid to the investors.

Once you have established the magnitude of the return to be made, it should be added to all of the other costs and bills to be paid – all of these then have to be paid during the financial period from the sale of labour, parts and anything else you sell.

Accepting these charges set the parameters of a business. A plan looks at how the intention becomes a reality. All aspects of what you do – and in the quantities that you do it – must be considered. Believe me, using fictitious figures or guess-work, make planning meaningless and will have you visiting your accountant to learn if, during your last financial period, you made any profit.

Business management looks daily, weekly, monthly and year-to-date on your progress toward your goals. This is not the job of your accountant, book-keeper or wife/partner (if they’re not the same person), all of their functions are after the fact – after the work is done. If the basic product, labour, is not controlled and used efficiently all they can count is chaos.

Your labour rate, another function of business management, gives consideration of how many units you are capable of selling – please note I did not say buy or use! Sold hours divided by cost; it is as simple as that. The key to achieving target must, therefore, start from turning this intention into a reality – and measuring it every day.

Consultants, like me, crack on about Key Performance Indicators (KPI’s), when all they do is give you a heads-up on a particular subject, just like a headline in a newspaper. It’s only if there is a point of interest that you read down into the text and KPI’s are used in exactly the same way, either over or under expectation, that you look deeper into the content.

KPI’s are not all financial, far from it. They measure time, loan-car use, consumables and parts profits, indeed anything that is a point of interest and requires management – all to give management control to turn intention into a reality.

While working with a client in the Midlands, a member of staff said to me: “You’re anal about these figures.” I replied: “I am anal about achieving targets, the figures just let me know that I’m on target.”

As business owners we become too close to the wood to see the trees. Often in among the day-to-day activity we accept and even condone slips from best practice with comments such as ‘We did our best’, ‘it was out of our hands’ or ‘ if the parts supplier…’. Business management is a game of averages not individual circumstances. If your KPI identifies a problem, look at the problem at that level then cascade the solution down to work level activities. Understanding and embracing business management gives you an added dimension to be objective about the work and reflective about the results.

Having taken business management into my own businesses and used it to develop our own performance levels I am, of course, a campaigner for the merits thereof – but others are coming on board. Increasingly I see others offering various training courses on the subject – I salute them. Far from being ‘dog-in-the-manger’ about this I see the spreading of business management within the Independent Garage Sector as an effective tool in finding the route out of Bedlam, post-recession.

While KPIs are not always financial neither is good business management training focused on KPIs but will extend into reception training, workshop loading and newer soft skills such as closing techniques, controlling situations, Customer Satisfaction Indexes (CSI) and Customer Relationship Management (CRM) One attendee at a business management course commented: “I send technicians on courses to learn about the last five percent without realising that there was another 85 percent to my own job.”

So let me take you back to another of those annoying sayings: “A dream is just a dream – a goal is a dream with a plan and a timescale” so, tell me, are you going to dream away 2014?

This post was written by:

- who has written 1175 posts on CAT Magazine.


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